Silicon Alley Insider's startup index: Click bait? Nah. It's tip bait

Lists have never done much for me--especially financial lists. It's financial porn: Forbes' most wealthy people; the Fortune 500; 10 mutual funds you must have now and a few hundred other lists.

Lists have never done much for me--especially financial lists. It's financial porn: Forbes' most wealthy people; the Fortune 500; 10 mutual funds you must have now and a few hundred other lists. And now Silicon Alley Insider has launched a startup valuation index that's bound to be a conversation starter.

You mean Facebook is only worth $9 billion? Wikipedia: $7 billion. Oanda? Linden Lab at $1.1 billion. Umm. Ok. The list is a conversation piece and some would dismiss it as clickbait. But the SAI 25 list (Techmeme) of the world's most valuable startups is about much more than clicks.

Check out the methodology: It's straightforward stuff with implied valuations, financial performance, market share and growth rate. The problem: Startups don't disclose any of those things. There are no SEC filings here. SAI has put a lot of legwork into its list, but there's a decent chunk of guesswork too.

Here's the game behind the SAI 25: Get startups to cough up more info. Here's how it works: LinkedIn thinks it's worth more. It calls Henry Blodget, Silicon Alley Insider's chief, and says: "Boy, are you off. Our revenue is X and our market share is Y. By the way, we're getting another round of financing and plan to IPO in early 2010."

Mission accomplished. And the fine folks behind the SAI 25 know this scenario will play out repeatedly. At least they aren't shy about it. Last paragraph in their methodology:

Again, valuation is highly subjective, and it is only as good as the information on which it is based. If we have grossly misvalued a company, the most likely reason for this is that we don't have good enough information. If you think any of our valuations are off, therefore, we'd love to hear from you (please post in the comments or send on background to tips@alleyinsider.com. In the latter case, please include your email, so we can follow up.)

Brilliant.